Telecommunications infrastructure: traditional and emerging challenges

Philipe MouraRegulatory ManagerGSMA

What are the emerging issues?

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Policy & Regulation

Conver-gence

IoTUse of data

The internet value chain emcompasses a complex fabric of players thatinteract to create the end user experience

C

The internet value chain encompasses a complex fabric of players that interact to create the end user experience

4

C

5

Strong complementarities between infrastructure

and services

Services

Access

Individual contributions to social welfare difficult to disentangle

The whole ecosystem is driven towards continuous expansion C

… And yet, the internet value chain is dynamic

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C

Competitive Dynamics of the Digital Ecosystem

Modularity

• All digital players engage each other across the value chain in a variety of roles

• Digital sector is not a collection of related but separate markets but rather a single, integrated ecosystem

Economies of Scale and Scope/Network Effects

• Competition “for” the market, not “in” the market

• Consumers benefit from size and scope; regulation should not impose barriers to their realization

Dynamic Competition

• Transformative innovation generates choice and value for consumers

• Static “dominant” positions are dynamically contestable

• Regulation should notinhibit innovation and investment

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C

The IoT is transformative

8Source: HBR

I

The IoT value chain is complex and involves many players

Companies will build cross-industry alliances and partnerships, increasing the intensity of competition

Operator networks

Smart modules

Smart objects

Integrate systems

Provide Service

Source: PwC analysis, ADL

Individual

Government

Enterprise

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I

Machinery and car manufacturers

AudiGE

BoschJohn Deere

PTCTesla

Telecom & Technology firms

AT&TAlphabetAmazonMicrosoft

CiscoVerizon

Vodafone

Non-traditional entrants

XaomiFitbit

JawboneSIGFOX

Alarm.com

Many players compete to own the end user relationship

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IoT solutions led by application vendors(e.g. health)

IoT solutions led by systems integrators(e.g. industrial IoT, smart cities)

IoT solutions led by connectivity providers(e.g. smart home, fleet management)

Systems integrators

Applicationvendors

IoT platform provider

Connectivity provider

Device vendor

End user

Systems integrators

ioT platform provider

Connectivity provider`Device vendor

Application vendor

End user

Systems integrators

Applicationvendors

IoT platform providerDevice vendor

Connectivity provider

End user

Application vendorIoT platform provider

Connectivity providerDevice vendor

Systems integrator

End user

IoT solutions led by device vendors (e.g. wearables)

I

IoT has a “glocal” dimension – global production and local connectivity models

Connected cars manufactured in

one location

Distributed globally with installed sensors,

seamless connectivity, data and analytics

Distinct elements of the value chain will be performed in different

geographies

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I

Connectivity spend is typically only a small fraction of overall project cost

Spend on value chain elements for typical IoT solutions* [Source: Analysys Mason]

Systems integrators or installers

<30%

Applicationvendors

30-60%

IoT platform

<10%

Connectivity

2-20%

Device

5-20%Spend

* Indicative figures only. The exact spend will vary by solution and vertical market

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I

Traditional servicesTraditional services IoTIoT

Cell phones

Correlated to the number of people

Connectivity

High

B2C or B2B

Any device

Correlated to the number of devices

Many types of solutions

Low

B2B2C or B2B2B

Thus, the IoT is still fundamentally different from traditional services

High Low

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Connected element

Number of connections

Main service

ARPU

Business model

Maturity

I

Growing in volume, variety and nature

Key driver of innovation

Critical asset for businesses and governments

Increasing value and interest for consumers

Data for good and social change

Global footprint, flowing across borders

Data is not the new oil – it is much more than that

14

Source: CIPL

D

Users and “things” are becoming more connected, everywhere,generating data at all times

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D

Principles-based regulation of privacy

• Based on risk for consumers

• Technology and industry neutral

• Favorable to investment and innovation

Trust and accountability on big data

• Big data analytics and IoT depend on the availability of data and on consumer trust

• Privacy by design• Adoption of

internationally recognized privacy principles, such as transparency, control, purpose and accountability

Free flow of data across borders

• Recognition of corporate binding rules (corporate digital responsibility) and of codes of conduct

• Restrictions and conditions on international data flows should be kept to a minimum and applied in exceptional circumstances only

How do we move forward while creating the right environment?

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D

How is infrastructure in Latin America today?What can be done to improve it?

How do existing challenges relate to emerging opportunities?

3G in Latin America covers more tan 90% of the population, more than any otherdeveloping region

99% 96% 91% 83% 79% 78%

49%

0%10%20%30%40%50%60%70%80%90%

100%

Norteamérica Europa Latinoamérica CEI MENA Asia Pacifico AfricaSubsahariana

Cob

ertu

ra 3

G d

e la

pob

laci

on

Taking this 3G to the remaining 10% demands significantinvestments, and there are no commercial incentives todo so

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Fact #1 Fact #2

~2x of total investment todayHow much is needed to take 3G to 99%

of the population

10x lessRevenue generated

Rural vs. Urban sites

Fuente: GSMA 2017

Taxation policies that overburden and distort the telecoms market

Regulatory asymmetry between operators and other ecosystemplayers

Regulatory frameworks that disincentivize investments in infrastructure

Regulatory frameworks in Latin America are not always aligned withthe goals of the digital agenda

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Considerations for policy & regulation

Regulating well is always difficult…

• Market conditions and technologies change in unpredictable ways

• Regulations often impose substantial compliance burdens

• Regulation inevitably benefits some interests over others (every policy is necessarily a redistribution of something)

…and more so in the digital ecosystem

• Complexity of digital markets increases tendency of error

• Rapid change accelerates regulatory obsolescence

• Many issues require participation and input from multiple players

• Innovation and entry are distorted by regulatory burdens and risks

To address existing and future challenges regarding the digital ecosystem, regulation should be functionality-based, dynamic and constantly re-evaluate

itself to ensure it is supporting the policy goals behind it

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Obrigado!

Philipe MouraRegulatory Manager